Ceasefire unlikely to bring back low oil prices? After the energy crisis, countries are scrambling to replenish their inventories.

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Even if the situation in the Middle East eases, global oil prices are unlikely to return to pre-war levels—governments around the world are racing to expand strategic oil reserves, and this wave of restocking will keep the oil market in a tight state for a long time.

Oil prices remain high, and have fluctuated sharply recently due to renewed threats to ceasefire agreements. According to the latest report from the Wall Street Journal, even if a peace agreement is finally reached, about 100 million barrels of crude oil are still stranded in the Strait of Hormuz waiting to be shipped. It will take time for the shipping and insurance industries to restore normal passage, and supply pressures will not dissipate in the short term.

An even deeper impact comes from the demand side. Several Asian countries including Pakistan, the Philippines, Indonesia, and India are speeding up the establishment or expansion of strategic oil reserves; Japan has announced $10 billion in aid to support Asian countries in building storage facilities.

Analysts believe this round of restocking will lead global oil inventories to remain at levels above those before the war for the long term, thereby providing sustained support for oil prices.

Huge supply gap, a long road to restocking

This energy shock has left a vast supply gap.

According to S&P Global Energy data, regions outside the Persian Gulf have already depleted crude oil and refined product inventories, requiring nearly 500 million barrels to replenish; and each additional day of closure at the Strait of Hormuz adds another 5.8 million barrels to this figure. Even if the market has a sudden surplus supply of 1 million barrels per day, it will take more than a year for global inventories to return to pre-war levels.

The International Energy Agency (IEA) predicts that even if the strait reopens this month, the oil market's supply shortage will persist until the fourth quarter of this year, when a slight surplus may appear and inventories consumed rapidly everywhere can begin to be replenished.

Sultan Ahmed Al Jaber, CEO of Abu Dhabi National Oil Company, said it will take four months for traffic in the Strait to return to 80% of pre-war levels, and full recovery will not be seen until the first or second quarter of 2027. Saudi Aramco has given a similar timeline forecast.

Uneven capacity restoration, some oil producers face technical bottlenecks

As for production growth capacity, oil-producing countries are in different situations.

Saudi Arabia and the UAE both have idle capacity and can quickly boost output. The UAE withdrew from OPEC last month, and is no longer bound by production quotas, so it can freely expand extraction.

By contrast, Iraq and Kuwait's production restoration is expected to be more sluggish. Both countries rely heavily on foreign oilfield service companies and need to re-inject pressure into aging, low-pressure wells, which entails greater technical difficulty and time costs.

Trader Rick Bandazian, founder of trading analysis platform Offsides Macro, said: "I think we're at a fairly critical juncture." His tracking of WTI futures data shows that oil market traders are still generally betting on further price increases, but the aggressiveness of bullish positioning is now lower than its peak in mid-March this year.

Countries race to build reserves, Asia becomes the main battleground for restocking

This energy shock is profoundly changing national energy security strategies, with restocking actions especially intense in Asia.

Pakistan previously had no strategic oil reserve, and now plans to establish its first reserve system, inviting international oil producers to build a new "energy city" near Karachi's Qasim port for commercial inventories.

The Philippines is also launching its first strategic oil reserve program. Indonesia's government has announced new storage facilities to expand stocks, and India is scaling up its reserves.

Japan is adopting a more proactive regional approach, pledging $10 billion in financial aid to support Asian countries in constructing storage facilities and oil inventories.

Kevin Book, co-founder of energy consulting firm ClearView Energy Partners, remarked: "Importing countries' governments ask only one question: 'What can we do to make sure this never happens again?'"

Energy transition accelerates, but oil’s dominance unlikely shaken in short term

This crisis is also accelerating a renewed review of energy structures in various countries.

EU minister-level officials are now debating whether to expand oil and gas production within the region, which was almost unimaginable just a few years ago.

Meanwhile, cost-effective Chinese electric vehicles and solar panels are providing more choices to countries that hope to reduce imports of fossil fuels. According to think tank Ember, this March, 50 countries set records for imports of Chinese solar modules.

History shows that energy shocks often lead to profound structural changes.

The two oil crises in the 1970s forced the US to dramatically boost energy efficiency and shift toward alternative sources. Now, only about 1% of US power generation comes from oil, whereas in the early 1970s nearly one-fifth did.

However, a true energy transition takes time. Until then, expanding inventories and securing supply remain governments’ overwhelming priorities, which are also the core logic sustaining high oil prices for a longer period.

Risk Disclaimer and TermsThe market has risks, and investment needs to be prudent. This article does not constitute personal investment advice and does not take into account the unique goals, financial situation, or needs of individual users. Users should consider whether any opinions, views, or conclusions herein fit their particular situation. Any investment based on this is at your own risk. ```